Vol. 423 No. 5
11 Mr. J. Mitchell asked the Minister for Social Welfare the total amount of social insurance which will be raised in the current year from both the employer's and employee's contributions for a person on the average industrial wage; his views on whether this is an acceptable tax on jobs in the current unemployment situation; and whether he has any plans to reduce this payroll tax and find an alternative source of social insurance funding.
38 Mr. Rabbitte asked the Minister for Social Welfare if he is considering any overall, or partial exemption from, or reduction in, employers PRSI for any categories of employers; if so, the implications for the funding of social welfare benefits; if he will give an undertaking that social welfare benefits will not be further reduced due to any such reduction; and if he will make a statement on the matter.
I propose to take Questions Nos. 11 and 38 together.
The pay-related social insurance contribution rates applying to employees and employers generally are 7.75 per cent and 12.2 per cent, respectively. This includes a health contribution of 1.25 per cent and an employment and training levy of 1 per cent which are normally levied on the employee. The latest date for which data on average industrial earnings are available is June 1991 when average earnings were £237 per week, or just over £12,300 per annum. On this basis, the annual contribution made by an employee on the average earnings is £935 while his employer contributes an additional £1,500.
These contributions are by no means excessive by international standards. Among our EC partners, employee contribution rates are as high as 18 per cent in Germany and employer contributions rates are as much as 50 per cent in Italy, for example.
I have no plans to reduce the level of social insurance contribution rates generally. A reduction in the contribution rate of even one percentage point would cost in the region of £80 million, which would have to be made good by the Exchequer through increased taxation.
The scheme to exempt employers from employees' PRSI which was recently announced by the Government will not impose costs on the Exchequer. Under this scheme employers who take on additional full-time employees in the period from 19 October 1992 to 19 March 1993 will not be liable for an employer's contribution in respect of those employees for a period of two years from April 1993. To the extent to which additional employment is created, PRSI income will be increased. In addition, as the workers will be drawn from the live register there will be a saving in unemployment payments. There will, therefore, be a double benefit to the Exchequer. The question of a reduction in social welfare benefits to finance this scheme does not, therefore, arise.
Employees taken on under the scheme will be insured for the full range of benefits, even though no employer's contribution will be paid.
Would the Minister not accept that our unemployment problem is of an exceptional degree, even given the recession in Europe, in that about 22 per cent of the workforce are unemployed and there has been emigration of about 108,000 people over the past five years? To impose a tax of £2,453 on every job before a worker pays a penny in income tax or towards his pension contribution, trade union dues and transport costs to work is crazy. We are taxing jobs out of existence. The Minister did not reply to part of my question. Has he considered any other base for raising social insurance contributions other than payroll? Has he considered, for instance, company turnover, so as to lift the tax off labour-intensive industry and shift it to some extent to capital intensive industry?
The high rate of unemployment is self-evident. It costs the State an extraordinary amount of money each year in social expenditure, especially when there are 290,000 people on the live register. The 1992 estimate for unemployment payments was £946 million; the outturn will be at least £1,000 million. Only a certain proportion of social expenditure is raised from PRSI; the rest comes from general taxation. Any changes in this regard would have to be decided upon by the Government. I, as Minister for Social Welfare, rely very much on PRSI to part fund the system. The cost of reducing it by even 1 percentage point would be about £80 million. The idea Deputy Mitchell put forward can be considered. I am sure it was considered by the Government of which he was a member and by various Governments in the past.
At present there are no proposals to change the system in that way. I accept that PRSI is a burden on the employer but compared with other countries we are at the bottom end of the scale. It is not true to say that we are out of line with other countries.
We are very much out of line if we combine PRSI and PAYE.
Question No. 12.
I think Priority Questions started a little after 3.20 p.m.
In this situation the Chair cannot win. Sometimes I am criticised for not giving enough time but if I go slightly over the time I am also criticised.
"Slightly" is a bit of an exaggeration. I would be happy to take Question No. 14.
